Baroness Hogg: My Lords, I, too, begin by declaring an interest. I am the "other half" of that "battery" of governors referred to by my noble friend Lady Anelay. I am not sure that, between us, the noble Baroness, Lady Young of Old Scone, and I could man a battery very satisfactorily. However, I share my noble friend's disappointment that we form so high a proportion of those who are present for this debate. My noble friend has performed a great service in providing an occasion for the discussion of this important set of issues. I should like to assure her that the guns in my battery are certainly not trained towards her. A candid friend--and I stress the word "candid"--is exactly what the BBC needs.

I commend the Government on providing the BBC with security of funding in the licence fee settlement for a sufficient period of time to enable it to evolve something that presents extreme difficulty; namely, a strategy for public service broadcasting of the quality that Britain has come to expect from the BBC in a world that is changing extremely fast technologically. I should like to take this opportunity to congratulate the noble Lord, Lord Birt, on all he did to help the BBC think its way through to that new world at the same time as focusing on the programming that it was presenting in the old one.

I also commend my noble friend for raising a number of issues relating to concessionary licence fees. It is important that the Government are given this opportunity to respond to the questions that she has raised. If the Minister will forgive me saying so--and if my friends in the Treasury will forgive me--it would be a not unfamiliar Treasury trick to allow some of the cost to trickle back on to the BBC. That would, of course, be to the disbenefit of all licence fee payers. I am sure the Minister will provide satisfactory answers to the questions raised by my noble friend. I conclude by again congratulating her on raising them.

Lord Gordon of Strathblane: My Lords, I intervene briefly simply to spare the embarrassment of the Board of Governors of the BBC, who feel that they may be monopolising the debate! I was a member of the committee that examined BBC funding. The committee was unanimous in its feeling that the BBC should be given more funding. Any body which depends on an RPI-based settlement needs that settlement re-examined between five and 10 years in to the period of funding because it inevitably gets out of kilter with what is happening in the real world.

I disagreed with my colleagues on the committee who advocated a digital licence fee. I suggested that the current agreement, which was meant to be RPI-minus

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for the next two years, should be broken and restored to an RPI-plus basis. My principal reason was to guarantee the BBC extra funding. The Government have gone marginally further than I would have done and the settlement is more generous than I suggested. I do not quarrel with that--I would rather err on the side of generosity to the BBC than the other way.

My main argument against a digital licence fee--and I am glad the Government have rejected the idea--was that the prospect had united every other broadcaster against the BBC in a way that I have not seen in 40 years in broadcasting. That would have posed grave dangers for the survival of the licence fee in 2006. I hope that it will survive. It is a distinctive form of funding and one which should be retained.

A further point raised by the noble Baroness, Lady Young, was whether there was a danger to the BBC's independence from the direct government funding of licences for pensioners over the age of 75. The situation would have been even worse had the Government done nothing and left the BBC as a kind of surrogate Department of Social Security and the licence fee as an form of extra taxation that did not count as taxation. It is much better that the Department of Social Security should fund benefits where it believes that they should be funded. It should not be part of the BBC's job to do that.

Thirdly, it is important to distinguish public service broadcasting from public funding--a point that has not been touched on so far. The triumph of broadcasting in this country under successive governments is that public service broadcasting has extended across the ITV network. One need only look to the fact that the current chairman of the BBC, the most recently retired director-general, the noble Lord, Lord Birt, and his successor, Mr Greg Dyke, have all emanated from London Weekend Television. That suggests that, unless they underwent a road to Damascus conversion during the taxi ride from one building to another, public service principles imbue traditional commercial broadcasting in this country as well. It is vitally important that we preserve that. Frankly, the 1990 Act did immense damage to ITV, some of which is now becoming apparent in a reduction in the quality of quite a lot of the programmes.

However, it is important that there should not be an automatic assumption that, if there is to be public service broadcasting, it can be provided only by the BBC. If the Secretary of State decides, for example, that he wants a new service to be a public service, it may well be that it should then be open to the ITNs of this world to go for that as well as the BBC. That will produce a healthier broadcasting ecology. If we confine public service broadcasting to the BBC and let the rest run riot, we shall eventually end up with the equivalent of the public service channels in the United States, which attract a tiny minority audience. We need public service broadcasting across the spectrum so far as is possible.

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Lord McIntosh of Haringey: My Lords, I have never played this game before and do not know the rules about how the Government Front Bench should respond to a Prayer to annul an order. Apart from expressing regret that the noble Lord, Lord Birt, did not seize the opportunity to make an impromptu maiden speech--he would have been within his rights to do so--I shall precis the long speech that I have before me in praise of the BBC and then answer the questions posed by the noble Baroness, Lady Anelay. I agree with virtually everything that has been said by other noble Lords who have taken part in the debate. I make one exception. I believe that the comments of the noble Lord, Lord McNally, about interoperability and other matters fall outside the scope of the order.

In so far as all noble Lords have spoken about the role of the BBC, the importance of security of funding and the licence fee, and have said how much they welcome the decision that has been taken, I do not believe that there is much point in repeating in detail the speech which was made last night in another place. The first paragraph of my speech states that the Government are committed to the continued role of the BBC as the United Kingdom's principal--not the only--public service broadcaster. I emphasise those words for the benefit of my noble friend Lord Gordon. My noble friend is quite right that public service broadcasting principles should apply to all broadcasting, not just to the BBC. The paragraph goes on to say that the BBC's central role is the provision of free access to its public service channels with a high standard of information, news, education and current affairs programmes.

The next paragraph of my speech states that of all the options for funding the corporation the current television licence fee has distinct advantages; in other words, it is probably very bad but it is better than all the alternatives, as the noble Lord, Lord McNally said. I agree with the noble Baroness, Lady Hogg: we thought that it was important to provide sustainable funding up to the end of the Royal Charter at the end of 2006 in the expectation that, if that policy was successful, it would lead to continued stability of funding thereafter. We appointed Gavyn Davies to chair an independent review panel which came to the conclusion that the licence fee, with modifications, was the correct way forward. We have taken account of the report of the panel and also commissioned a review of the BBC's financial projections by independent consultants to assist our decisions on finance and an analysis by the Department for Culture, Media and Sport.

We have not adopted all the proposals of the review panel. For the reasons that have been well expressed, we have rejected the view that a digital licence supplement is an appropriate alternative or addition, but we have agreed with the panel that additional funding should come in the first instance from self-help. Therefore, we have challenged the BBC to help itself by efficiency savings, partnerships, joint ventures, reductions in bureaucracy and other means. We have set a target of £490 million by 2006/07 over and above the £600 million which the BBC has itself estimated. We recognise that that is a more demanding

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target than that set by the Davies panel. On that basis, we have decided to provide the required additional licence fee funding via annual increases of 1.5 per cent over RPI from April this year through to 2006.

We have also accepted the general thrust of the review panel's recommendations about transparency, fair trading and accountability. We shall institute procedures for the introduction of new services which will include an opportunity for public consultation before the Secretary of State reaches decisions on proposed new services. There will also be a programme of reviews of all the current BBC digital services--"News 24", "Choice", "Knowledge" and "Parliament"--to ensure that they achieve their stated purpose. We do not expect the licence fee to fund services such as dedicated film and sport channels where there is no distinct and separate public service remit.

We shall commission independent scrutinies of the BBC's fair trading policies and financial reporting and publish the results. As to concessions, we have already gone beyond the Davies recommendations with the announcement of free licences for those over 75. The noble Baroness, Lady Anelay, asked me why the Government had changed their view about the means by which that should be achieved. Free television licences can be introduced under the provisions of the Wireless Telegraphy Act 1949, as amended. However, an amendment to the BBC's agreement with the Secretary of State will be required to enable the Department of Social Security to make payments to the BBC to cover the cost of free television licences. That will be done by affirmative resolution.

The Government will also bring forward primary legislation to enable the Department of Social Security to provide information to the BBC. That will assist in the efficient administration of the scheme and, in most cases, enable the application procedures to be greatly simplified. Without going into the history of how these decisions have been arrived at, I can say only that they have been taken on the advice of the highest possible authorities. The cost to the taxpayer of free licences will be approximately £368 million. The administration cost will be £24.3 million, and the ongoing costs are expected to be £10 million in the first year and £8 million per annum thereafter. All of those costs will be borne by public funds, not the BBC.

The noble Baroness, Lady Anelay, asked about those over 75 who applied for licences. That question has already been dealt with by my noble friend Lady Young. The answer is that all households will need a licence. I am glad that my noble friend Lady Young is reassured that that will help to preserve the independence of the BBC's funding. The noble Baroness, Lady Anelay, asked me about the removal of the right to a free television licence where a man in sheltered accommodation aged between 60 and 64 worked more than 15 hours a week. I do not know the answer to that question. The noble Baroness has apparently been given that question by the BBC's licensing unit. It would have been helpful if it had given the department its opinion before the order was framed but it did not do so. That matter must be

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investigated. I shall provide an answer to the noble Baroness and copy it to all those who have taken part in the debate.

I do not believe that it is for me to defend the order any more than I have. The basis on which the Prayer to annul is made is very limited. I am grateful to all noble Lords who have taken part in this short debate.